I have an entire category of blog posts with the basics of my proven trading strategy, but below I thought I?d list the top 7. Not necessarily the top 7 most important, as you know from this list of 94 PennyStocking lessons there?s a lot to consider, but the 7 lessons below are the ones I?ve found people have been having the most trouble with since I began teaching over the past 3 years or so:

1. Unlike other niches and due to a lack of liquidity and sometimes volatility, there are NOT great trades every day. It?s it CRUCIAL to learn to recognize these setups and then to wait for ideal setups before using your precious trading capital.

2. When short selling penny stocks, not every broker will have available shares to short. There is no one great broker that will always have available shares and sometimes none of my brokers have available shares to short (in which case no borrow no cry), but the 3 brokers I use and recommend are Thinkorswim, Sogotrade and Interactive Brokers

3. No matter how great a penny stock?s story is, I have learned to focus on chart patterns and price action first ? there are a TON of penny stocks with ?revolutionary? products, but if the stock isn?t moving in a way that is predictable, I don?t care.

4. NEVER trust any penny stock press release or penny stock CEO or penny stock newsletter. The entire niche is corrupt excluding yours truly and no matter how nice somebody is in person, if they are into penny stocks, there is a 99.99% likelihood that they are shady, unethical, incompetent or some mix of all of the above.

5. I will not trade stocks under 10 cents/share because the risk/reward simply is not worth it. Sure, sure, these low priced stocks can increase a large percent in a short period of time, but in 11 years of penny stock trading experience, I have not seen the predictability/reliability of any patterns to make buying or shorting these stocks worthwhile for me.

6. While I sometimes short sell a pumped up penny stock on its ?first big up day?, I usually tend to wait until the 2nd or 3rd day as then my risk is much lower due to early wannabe short sellers having been squeezed and the logic that fewer people will want to buy a penny stock when it?s up 100, 200, 300% in a few days. The exception is when there are few shares to short and it will be unlikely to find available shares to short on those 3nd or 3rd up days so I will sometimes risk some pain and enter my short early, but NEVER a large position due to the risk of further spiking.

7. If the penny stock I am short selling or buying is not a pure pump & dump (which have the highest predictability), I will ALWAYS cut losses quickly because if a stock moves against me, even a little bit, I am probly wrong in my thesis. I am not a perfect trader by any means so if I don?t cut losses quickly, it means I have made a mistake. Yes it does happen. My substantial gains are not due to my being perfect, but as an academic study found, due in large part to my being right approximately 75% of the time with my gains being larger than my losses.

Disclaimer: Trading and investing involves significant financial risk and is not suitable for everyone. No content on this website should be considered as financial, trading, or investing advice. All information is intended for educational purposes only.